EY examine sheds gentle on monetary safety hole
According to the EY Global Insurance Consumer Survey, financial vulnerabilities and health concerns are more common among young consumers in emerging markets, fueling the desire for insurance coverage. The survey interviewed 4,200 consumers in seven countries in Africa, Asia, and North and South America.
The study examines the growing protection gap between consumers in emerging markets and consumers in developed markets. It also provides insights into the impact of the COVID-19 pandemic on consumer financial risks, vulnerabilities and needs for insurance preferences.
The survey found that consumers in emerging markets had more of a financial impact from the pandemic than consumers in developed markets. 78% (78%) of consumers in emerging markets had to use their savings, 61% lost income, and 54% missed some bills or payments, compared with 33%, 30% and 22% in developed markets, respectively. In addition, vaccination rates are significantly lower in emerging markets, and concerns about losing a loved one and financial well-being are significantly higher.
The demographic distribution of consumers in each market plays a role in how the pandemic affects financial stability, EY said. Consumers in emerging markets are younger (75% are under 44 years old, only 3% are retired) and often lack a comfortable financial cushion and certain insurance coverage. For example, only 10% have $ 100,000 or more in investable assets, compared to 37% in the developed world. Only 56% of consumers in emerging markets have home coverage compared to 88% in developed countries.
Next read: Swiss Re on key growth drivers in emerging markets after COVID-19
“Insurers play an important role in protecting those who need it most,” said Fayez Jaffer, director of product innovation at EY Americas. “You need to start by building trust through personal connection and empathy in order to thoroughly understand your clients’ personal and financial goals. Connecting with customers on a human scale – especially through digital channels that younger consumers prefer – is essential to meet their customers’ changing needs, improve financial well-being, and build sustainable relationships over the long term. “
Emerging market consumers have a keen appetite to buy insurance products, EY noted. Consumers in emerging and developed markets have shown interest in short-term products like insurance that can fund college education or pay credit card bills in the event of job loss. However, among all eight products proposed in the EY survey, consumer propensity to buy in emerging markets was almost twice as high.
The survey also found that corporate social responsibility (CSR) plays an important role in purchasing decisions in emerging markets. The pandemic, along with other events over the past year, has increased consumer interest in CSR and raised expectations about the contribution of businesses to society. Fifty-nine percent (59%) of consumers overall are at least reasonably familiar with the CSR stance of their insurers, EY noted – and consumers in emerging markets are more aware of their social engagement. A quarter of respondents said they chose one insurance brand over another because of their CSR reputation.
“Consumers continue to focus on social responsibility and social goals, so it is important for insurers to demonstrate their commitment to these issues,” said Bernhard Klein Wassink, global insurance customer and head of growth opportunities at EY. “Now, more than ever, insurers should focus on putting these issues at the forefront of their products and services to support financial and social recovery efforts, especially for those most at risk in the uncertain environment.”